Monitoring project bank account compliance
Head contractors can face significant penalties for failing to comply with all the requirements of project bank accounts (PBAs).
They may appoint a delegate to manage the PBA (with notifications to the principal and subcontractor) but they remain liable for any acts or omissions.
The principal plays a significant role in monitoring the use of PBAs and reporting any non-compliance. Read more in the Principals guidelines (PDF, 1.1MB).
The principal has certain obligations to check that the head contractor is complying with their requirements under the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act). This includes:
- reporting payment discrepancies to the Queensland Building and Construction Commission (QBCC) and informing the QBCC if they become aware of a head contractor's non-compliance with PBAs
- ensuring the head contractor has set up the PBA as required, including that all 3 accounts have been named correctly
- possibly taking the role of trustee if the head contractor is terminated or goes bankrupt, and distributing the PBA's funds to its beneficiaries (use the S54 notice of principal replacing head contractor as trustee form (PDF, 708KB) to notify the head contractor).
The principal has viewing access for the PBA, so they may monitor:
- detailed transaction information on all transactions included in each payment instruction, including account names and numbers, and amount and date paid
- account payment reports detailing deposits into, and withdrawals from, PBAs
- transfers into the retention or disputed funds trust accounts, which must be 'identifiable' as being held for a subcontractor beneficiary through the transaction history of these accounts (i.e. subcontractor's name or abbreviation).
Although the principal can see these transactions in the PBA, it would be difficult for them to calculate the head contractor's margins because suppliers aren't paid from the PBA and the head contractor is paid from the account themselves (including their overheads and profit margins).
Termination or bankruptcy
If the head contractor is terminated or goes bankrupt, they must provide information to the principal and tell the financial institution that the trusteeship has changed.
The head contractor must still comply with the BIF Act and remains liable for any PBA act or omission.
New laws have strengthened the QBCC's powers to monitor PBA compliance and investigate PBA discrepancies and payment concerns raised by subcontractors. Read more about QBCC's powers.
Some important points to note:
- The PBA doesn't alter the contractual rights and responsibilities of contractors.
- The PBA doesn't remove the rights of subcontractors to seek adjudication or commence legal action when in dispute.
- Last reviewed: 26 Feb 2019
- Last updated: 26 Feb 2019